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Tesla's open source business philosophy

Tesla is handing over the keys to its electric car technology in order to shift development of vehicle electrification into high gear.

At Tesla's headquarters in Palo Alto, California, there is a bare wall where
140 glinting silver plates once hung, each having represented a patent for the company's trademark electric cars.

Their absence is a reminder of the company's latest push to get more drivers to opt for zero-emissions cars rather than traditional gas guzzlers.

Elon Musk, Tesla's well-dressed and widely respected CEO, said this week the company would relinquish all intellectual property claims over its e-car technology in order to incentivize other carmakers to take R&D into environmentally-friendly vehicles off the backburner.

In a Thursday blog post on Tesla's website, Musk promised to make the company's entire patent portfolio available to anyone who asked for it, the only stipulation being that no one then turns around and entangles the company in a slew of patent lawsuits.

Driving innovation

Musk said his motivations lay in the cause - more fuel-efficient cars on the road to reduce greenhouse gases.

"If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal," Musk wrote.

He explained that his decision to open up the 203 patents covering Tesla's lithium-ion battery technology and other key features came from dissatisfaction with the pace at which sustainable transport is moving forward.

"Electric car programs … at the major manufacturers are small to non-existent, constituting an average of far less than 1 percent of their total vehicle sales," Musk wrote. "Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis."

The move underscored a pivot in the company's stance with regards to its competition. Fears that big car manufacturers would steal Tesla's technology and then use their market dominance to overtake the company "couldn't have been more wrong," Musk wrote.

By opening its patents, Tesla rightly realizes it's better to be the best product in a large industry than the only product in a niche one.

Musk said he once regarded patents as an important means of guarding intellectual property but eventually came to the realization that such legal protections only stifled innovation.

His decision paves the way for more collaboration with Tesla, which is already partnering with Daimler and Toyota to develop electric vehicle systems.

Other auto manufacturers would be able to use Tesla's technology to develop their own line of electric cars, potentially positioning the industry to better meet marketplace expectations.

No e-car revolution yet

Consumers have long been confronted with promises of greater range and quicker charging of their e-cars, but those assurances have yet to materialize.

Tesla has made leaps and bounds in those areas - its Model S sedan has a range of over 200 miles on a single charge and there are around 100 charging stations around North America and Europe where drivers need about 20 minutes to get a fully drained battery back to a capacity that allows them to continue for another 100 to 150 miles.

One problem preventing an e-car revolution is the cost. Tesla caters to wealthy car owners - its Model S goes for $70,000 - rather than ordinary drivers. For electric cars to become ubiquitous - and for companies to have an incentive for installing charging stations along highways and in major population centers - owning an e-car must be economical.

At the moment, electric cars still only make up less than 1 percent of US sales.

"Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world's factories every day," Musk wrote in his blog post.